A single good's current price is 80 percent above its base-year price and current quantity is the same in both calculations. What is its deflator?
Answer and explanation
Correct answer: 180
The deflator equals (value at current prices ÷ value at base-year prices) × 100. Because the quantity is the same in both calculations, quantity cancels and the ratio depends only on prices. A price 80% above the base price equals 1.80 times that price. Therefore, the deflator is 1.80 × 100 = 180. Option 80 is only the increase rate.
Frequently asked questions
What is the correct answer to this question?
180
Why is this the correct answer?
The deflator equals (value at current prices ÷ value at base-year prices) × 100. Because the quantity is the same in both calculations, quantity cancels and the ratio depends only on prices. A price 80% above the base price equals 1.80 times that price. Therefore, the deflator is 1.80 × 100 = 180. Option 80 is only the increase rate.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP Deflator.
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